EPAct 179D Experts

"The least expensive kilowatt, is the one not used."

- Jacob Goldman

U.S. Utilities Combine EPAct Tax Savings with the Rosenfeld Curve

In March of 2010 dozens of leading scientists signed a paper proposing to
name a new unit of measurement called "the Rosenfeld." A Rosenfeld denotes the
energy and money saved by not building a five hundred megawatt coal fired
plant. Many leading utilities are using the Rosenfeld concept to offer their
utility ratepayers a much lower cost alternative to building or retrofitting
expensive power plants. The utility provided Rosenfeld alternative includes
utility provided cash rebates and outreach regarding section 179D EPAct tax
savings.

Code Section 179D EPAct Opportunities

Pursuant to Energy Policy Act (EPAct)1 Code Sec. 179D, as enacted
by EPAct, commercial property owners or primary designers in government
projects making qualifying energy-reducing investments in their new or existing
locations can obtain immediate tax deductions of up to $1.80 per square foot

If the building project does not qualify for the maximum
$1.80-per-square-foot immediate tax deduction, there are tax deductions of up
to $0.60 per square foot for each of the three major building subsystems:
lighting, HVAC (heating, ventilating, and air conditioning) and the building
envelope. The building envelope is every item on the building’s exterior
perimeter that touches the outside world including roof, walls, insulation,
doors, windows and foundation.

The Rosenfeld Thesis

Art Rosenfeld2 was a Princeton University physics professor who
analyzed America's energy use practices. Until Professor Rosenfeld challenged
conventional wisdom, U.S. utilities routinely projected regular increases in
U.S. electrical demand. For 25 years utility industry executives argued that
energy demand and GNP growth worked in tandem. With this belief set, the
consensus logic dictated the continuing need to build more power plants.
However a group of leading physicists led by Rosenfeld didn't accept the
conventional wisdom. Rosenfeld proceeded to put together an influential
Princeton energy study which concluded that systematic steps to improve energy
efficiency could materially reduce demand.

The California Rosenfeld Effect

Rosenfeld's findings evolved first into new standards for more efficient
refrigerators and freezers which were first enacted by the state of California.
The California standards were eventually adopted at the Federal level. The
appliance standards evolved into a more rigorous California building energy
code which in large part provides the methodology and mechanics for documenting
Section 179D. From 1960 to 1974 California follows the national increases in
electrical consumption patterns. However, from 1974 until 2008 while the rest
of the country's electrical consumption continually rises California's
consumption remarkably levels out. Energy experts call this demand leveling
effect the "Rosenfeld curve" or "Rosenfeld effect."

Chart 13

As illustrated above, by 2004, the annual per capita KWh usage in California
was less than the national average by approximately 5000 KWh. The reasons for
this leveling off in consumption are many and varied but technology innovations
and important policy changes can be credited as the prime driving forces behind
the change.

About half of these savings are the result of strengthened performance
standards for buildings and appliances made possible by advances and efficiency
improvements in HVAC and lighting technology. The other half can be attributed
to utility company programs that promote adoption of energy efficient
technologies. These programs were implemented after years of work between
energy conservation advocates such as Dr. Rosenfeld and utility companies that
needed to re-engineer their methods of recovering costs so that revenue could
still grow as consumption leveled off.4

The most important conclusion is that if California, the nation's largest
market state, can achieve this result, a large nationwide energy reduction is
clearly achievable.

Current U.S. Utility Developments

Throughout the United States many constituents are successfully opposing new
power plants and in particular new coal fired and nuclear plants. New power
plant opponents often cite the Rosenfeld curve. Recognizing the new reality,
utilities are increasingly acting on the Rosenfeld effect by encouraging
consumers by offering cash rebates to retrofit and upgrade to energy efficient
lighting, HVAC and better building envelope products. Knowledgeable utilities
are combining the cash rebates with extensive outreach and informing rate
payers about EPAct tax incentives.

First Energy, a leading multi-state utility, has just provided 15
combined EPAct and utility presentations to it's rate payers in as many
towns and cities in three states including Western Pennsylvania, Maryland
and West Virginia.

National Grid has provided combined utility and rebate presentations to
ratepayers in Massachusetts and Connecticut.

The Long Island Power Authority (LIPA) regularly provides combined rebate
and EPAct presentations to it's rate base. Long island has specifically
announced that it wants to use an aggressive upgrade program to eliminate
the need for a previously planned power plant.

Professor Rosenfeld's energy reduction theories can eliminate major utility
industry power plant related capital expenditures. Smart utilities can achieve
these goals by offering less costly cash rebates combined with informing their
customers of U.S. federal tax policies specifically created to achieve these
goals.